Beneficial Ownership (BOI) Reporting: Back on again! Oh no, I meant off again!
The recent developments in the legal landscape have brought significant changes to the Beneficial Ownership Information (BOI) filing requirements for businesses yet again. Here, we are providing an overview of the key updates and offer guidance on how to handle your filings in light of these recent changes.
Background and Legal Developments
Beneficial Ownership Identity (BOI) reporting has been a critical regulatory tool in the global effort to combat financial crimes and enhance transparency in corporate structures. The concept revolves around identifying and disclosing the individuals who ultimately own or control a company, thereby preventing illicit activities such as money laundering, terrorist financing, and tax evasion.
The origins of BOI reporting can be traced back to the early 2000s, when international bodies such as the Financial Action Task Force (FATF) began emphasizing the importance of transparency in corporate ownership. The FATF’s recommendations, which are considered the global standard for anti-money laundering (AML) and counter-terrorist financing (CTF) measures, highlighted the need for countries to ensure that accurate and up-to-date information on beneficial ownership is available to competent authorities.
In the United States, the journey towards BOI reporting gained significant momentum with the enactment of the Corporate Transparency Act (CTA) as part of the National Defense Authorization Act for Fiscal Year 2021. The CTA mandates that certain types of domestic and foreign entities report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
This law has been continually challenged on the basis of its constitutionality since its adoption. 2024 has been a year of legal twists and turns regarding the Corporate Transparency Act (CTA).
Initially, a Texas district court issued an injunction against the CTA, effectively pausing the requirement for businesses to report their beneficial owners. However, on December 23rd, the Fifth Circuit Court of Appeals recently granted an emergency motion to stay this injunction, reinstating the CTA’s reporting requirements.
The Fifth Circuit’s decision highlighted the government’s likelihood of success on appeal and emphasized the potential harm of leaving the injunction in place. This means that, as of now, the CTA is back in effect, and businesses must comply with the BOI filing requirements.
Oh no, not so fast!
On of December 26, 2024, a ruling by the U.S. Court of Appeals for the Fifth Circuit has effectively reinstated the nationwide pause on the enforcement of the CTA’s reporting obligations. The Court’s latest decision vacates a prior order issued on December 23, 2024, that had temporarily lifted the injunction blocking enforcement. As a result, the December 3, 2024 preliminary injunction blocking enforcement is back in effect, meaning that companies are once again not required to submit Beneficial Ownership Information Reports (BOIR) at this time.
Conclusion
The reinstatement of the CTA and the updated BOI reporting deadlines, then the undoing of that decision underscore the importance of staying up to date on this ever-changing law.
For any questions or further assistance, please consult your legal advisor or reach out to FinCEN directly. We will continue to monitor this matter as the law makes its way through the courts.
